William Martin, Jr. and Kristian Moriarty Author Law360 Article Discussing Economic Loss Rule

In California, the Economic Loss Rule has been critical to the development of the difference between tort and contract law. The Rule prevents plaintiffs from recovering economic losses resulting from the use of a product, protecting consumers’ reasonable expectations regarding recovery for injuries or damages caused by a product without exposing manufacturers to unlimited liability. In the Law360 article “The Economic Loss Rule and Negligent Misrepresentation,” William “Skip” Martin, Jr. and Kristian Moriarty discuss the background and rational behind the Rule, as well as the lack of clarity with respect to its application in causes of action for negligent misrepresentation.

Multiple California courts have determined that the Economic Loss Rule must apply in order to preclude claims for negligent misrepresentation, which is generally determined based on two principles. The first is that negligent misrepresentation does not involve conduct that is intentionally harmful; the second is that there is an inherent dichotomy between tort and contract law. Some have argued, however, that negligent misrepresentation is a tort of deceit, and therefore is excepted from the Economic Loss Rule’s reach.

Martin and Moriarty conclude the article by noting that they expect the California Supreme Court will ultimately determine that causes of action for negligent misrepresentation are barred by the Economic Loss Rule when the purported “misrepresentation” implicates the terms of a written contract between the disputing parties. To read the entire article, please click here.

October 3, 2016